City bosses warn Healey hiking bank taxes could drive business out of UK

Bosses of the UK’s biggest City groups have intensified calls to the Chancellor not to raise bank taxes in his upcoming autumn Budget.

The chief executives of UK Finance and the CBI (Confederation of British Industry) – David Postings and Rain Newton-Smith – were among those to sign a letter addressed to John Healey.

Lobbying from industry groups has stepped up in recent weeks amid mounting speculation that Mr Healey could choose to target banks with higher taxes.

The letter argues that the UK’s financial services industry “already faces a higher tax burden than our key international competitors”.

It added: “This includes sector-specific taxes over and above those applying to businesses generally – for example, banks are subject to both the bank corporate tax surcharge and the bank levy.”

The corporate tax surcharge is an extra tax on the profits that banks make, at a rate of 3%. The levy is a charge on certain equities and liabilities on their balance sheet.

“As well as weakening investor confidence and damaging UK attractiveness, a higher tax burden may not necessarily generate higher tax receipts if capital, people and businesses move elsewhere,” the letter reads.

“It could reduce the availability of finance and protection for households and businesses, and risk undermining the growth that both you and the Prime Minister have rightly identified as the key to the country’s long-term success.”

The City chiefs have argued that banking businesses are more likely to move their offices outside of the UK and to other financial hubs if taxes increase.

Bosses of TheCityUK, City of London Corporation, and Association for Financial Markets in Europe (AFME) also signed the letter.

The trade associations and industry groups represent banks and businesses across the UK’s financial services industry.

The Treasury has said it does not comment on “speculation, rumour and proposals” in response to the industry calls.

Mr Healey is said to be focused on the Government’s priorities which include providing families and businesses with “breathing space” and delivering “growth in every postcode”, while meeting the fiscal rules that the Government sets for itself.

The Chancellor met with the executives of the UK’s biggest banks and building societies earlier this week, but reports said he did not provide guidance on whether he will raise taxes on banks in the Budget, which will be delivered on October 28.

In contrast to leaders in the City, Mr Healey is facing separate calls for taxes on banks to be hiked in the Budget following a period of rising profits.

The Trades Union Congress (TUC), which represents unions with around 5.3 million workers across the UK, said increasing the bank surcharge to at least 8% would raise £9 billion over four years and could go towards supporting households with the cost of living.